Jerry Lai
Larry Wang
Mike Chow
Masoud Tashorofi
Jinglong Zhang
Agenda
•
•
•
•
•
Industry Overview
Current & future trends
Apple
Google
RIM
Industry Overview
Global Gadget History
The Computer
•
•
•
•
•
•
1936: first freely programmable computer
1951: first commercial computer released
1974: first consumer computers (IBM)
1976: Apple I,II
1984: Apple Macintosh
1985: Microsoft Windows
Internet
•
•
•
•
•
1969: the original internet
1971: first email sent
1990: Archie, the first search engine
1991: Internet available for commercial use
1996: more email than post mail in the USA
: BackRub search engine (Stanford)
• 1997: Google (googol)
Mobile Phones
• 1973: Motorola cell phone created
• April 3, 1973: first cell phone call
made by Martin Cooper
• 1983: first cell phone available to
consumers
• 2009: 600 million mobile phone
subscribers
• 2010: 5 billion subscriptions UN said
What is a Smartphone??
– All in one device that can be used as a cell phone
and has computing, PDA functions
– Variety of applications available
Evolution of the Smartphone?
• 1992: Simon
– Created by IBM
– Touch screen, fax, email, predictive keyboard
•
•
•
•
•
1996: Nokia 9000
2002: Handspring Treo 180 (Palm OS)
2002: Blackberry
2007: iPhone
2008: First Android OS phones
Smartphone Operating Systems
• Symbian Ltd.: Symbian
• Popular outside of the United States
• Acquired by Nokia in 2008
• Palm, Inc.: Palm
• Initially designed for PDA’s
• Microsoft: Windows Phone 7
• Replacing Windows Mobile
Smartphone Operating Systems
Apple, Inc. - iPhone OS
• Mobile version of Mac OSX
• Multi-TouchTM user interface
• Third-party developed applications
Apple
iPods
• Media player
iTouch
• portable media player, personal digital
assistant, and Wi-Fi mobile platform
iPhone
• iTouch with cell phone function
Apple
iPad
• tablet computer
iTunes
• Pricing model, media player and online store
Apple TV
• Digital media receiver, play IPTV
Smartphone Operating Systems
Google Android OS
• Based on Linux Kernel
• Created by Android Corporation;
purchased in July 2005 by Google
• Multi-touch and media feature
Google
Android phone
• Android mobile OS
Android Marketplace
• online software store
Google TV
Smartphone Operating Systems
RIM: Blackberry
• Popular among business professionals
• Unique push-email feature
• Traditionally secure network
• Third party applications
Rim
Blackberry phones
• Blackberry OS
Blackberry Playbook
• Tablet computer (blackpad)
Mobile OS in US share
Worldwide Smartphone Market share, Q1 & Q4 2010 (Source: Gartner)
Current & Future Trends
Mobile and Smartphone usage:
• Growth of mobile phone and Smartphone
usage in developing countries
• The Smartphone was originally for the business
user
• Sept 2010: 58.7 million Americans own
Smartphones (up 15% since March)
Digital Revolution
1990:
• Cell phone users: 12.4 million (0.25% of world
population)
• Internet users: 2.8 million (0.05% of world population)
2002:
• Cell phone users: 1.174 billion (19% of world
population)
• Internet users: 631 million (11% of world population)
2010:
• Cell phone users: 4 billion (67% of world population)
• Internet users: 1.8 billion (26.6% of world population)
Digital Music
• Broadly spread in mobile devices
• iTunes Store provides revenue stream for
digital content:
– Music
– Podcasts
– Books
– Apps
Social Media
• Facebook, Twitter,
YouTube, Myspace, etc
Social Media Goes Mobile
• More than 200 million
active users currently
accessing Facebook through
their mobile devices, which
are twice as active on
Facebook than non-mobile
users in 2010.
• Social media will focus more
on mobile devices in the
next five years, including
smartphones and tablet PCs.
Advertising…
• Google; Sponsored links
• Smartphone advertising in applications
• Application advertising
– Build an application under the company name
• Social media advertising
– Facebook, twitter, myspace
Trends in Mobile Phone
Hardware Trends to Watch
•
•
•
•
•
•
Dual-core processors
3D displays
NFC (Near-Field Communications)
Dual SIM cards
HD Video
LTE (aka. 4G)
Tablet PC:
Combines the Smartphone, laptop and PDA
•
•
•
•
•
iPad 1 & 2
Motorola Xoom
Hp Touch Pad
Blackberry Playbook
Samsung Tab 1 & 2
The mobile trend doesn’t just bring joy to mobile ad companies, it also boosts the adoption rate of social sites like Twitter and facebook.
Mainstream Tablets Comparison
Battle on Apps
• Increased market growth
• Apple’s competitors increased their market
share
Battle on Apps (Cont’d)
• Omnipresence of Android
• Companies are getting in on the act
Application Store Comparison
What We Can Predict
What We Can Predict (Cont’d)
•
•
•
•
The Dominance of Android
New Apple iPhone models
Symbian won't go away
BlackBerry needs change
Apple Inc.
Financial Snapshot
5-Year Stock Performance
1-Year Performance
5-Yr Cumulative Return
Company Profile
• Apple Inc. (formerly known as Apple
Computer, Inc.) was founded by Steve Jobs,
Steve Wozniak, and Ronald Wayne
• Main business segment involves developing
consumer electronics
• Main Headquarter located in Cupertino,
California
Company Successes
• 1977: Apple II meets success
• 1991: Powerbook 100, Apple’s portable computer
• 2001: iPod introduced ( 220 Million sold as of
2009)
• 2003: iTunes opens; first successful revenue
stream for digital music.
• 2007: iPhone “reinvents the mobile phone”
• 2010: iPad introduced. Since then, more than 14
million sold.
Mission Statement
Apple designs Macs, the best personal
computers in the world, along with OS X, iLife,
iWorks, and professional software. Apple leads
the digital music revolution with its iPods and
iTunes online store. Apple reinvented the mobile
phone with its revolutionary iPhone and App
Store, and has recently introduced its magical
iPad which is defining the future of mobile
media and computing devices.
Product Revenue - 2010
Peripherals and
other hardware
iPad and related
3%
products and
services
8%
iPhone and related
products and
services
39%
Total Revenue:
$65.225 Billion
Software, service
and other net sales
4%
Desktops
9%
Portables
17%
iPod
13%
Other music related
products and
services
7%
Recent Developments
• iPhone4 CDMA released – Verizon
• iPad 2 launched – Launched in U.S on March
11th, over 300,000 sold within 24 hrs.
• Product sales growth (over 2009)
- iPhone: 93%
- iMac (desktop): 43%
• Success in Asia-Pacific
- Net Sales increase of 160% ($5.1 Billion)
Acquisitions - 2010
• Intrinsity ($121 Million)
– Produces high performance microprocessors,
likely to be used in the iPhone and iPod
• Quattro Wireless ($275 Million)
– Software contributing to the development of iAd
mobile advertising
Note: Little spent on acquisitions compared to R&D
spending ($1.78 Billion).
Threats to Profitability
• Reliance on third-party patents and
intellectual property
– Rapid patent and product development leads to
infringement and litigation (eight ongoing cases).
• Competitive technological industry
– Continual innovation, product introduction and
transitions
• Reliance on third-party developers
– Digital content and application software
iPatents
• Thousands of current patent applications resulting
from R&D
• Thousands of patents related to product spectrum
• No single patent to protect a product
• Products can become obsolete before patents
related to them are even granted
• Rapid innovation can lead to patent infringement
and litigation
Key Company Trends
1.
2.
3.
4.
Global Growth
Key Product Growth (Revenue Trends)
Litigation (Lawsuits from 10-K)
All that Cash…
Global Growth
Key Product Growth
All that cash…
All that cash?
All that cash…
• Speculation surrounds the accumulation of
cash, cash equivalents and marketable
securities. Rumors include:
– Acquiring Sony Corp. ($33.5 Billion market cap.)
– Acquiring major company with a CEO fitting to
replace Steve Jobs
– Creation of a social network (Ping already
introduced on iTunes)
Litigation
• Several patent related lawsuits in 10-K
• Successful patent infringement case awarded
plaintiff $624 Million
– Apple is appealing the ruling
– With cash, equivalents and marketable securities,
Apple could pay this 82 times over.
Management
The Company’s success
depends largely on the
continued service and
availability of key
personnel.
Steve Jobs
• CEO and Co-founder of Apple Inc.
• Business icon and inventor
• Born and lives in Silicon Valley
• Tumultuous past with the company;
but, his 1997 return coincides with
major turnaround.
• However, currently on medical
leave
Tim Cook
• Chief Operating Officer
• Temp CEO
• Responsible for worldwide sales and operations
• Previously VP of Corporate Materials and Compaq;
managed product inventory
• 12 years with IBM
• MBA from Duke University
• B.Sc in Industrial Engineering from
Auburn University.
Scott Forstall
• Senior Vice President, iPhone Software
• Delivers all iPhone software including user interface,
applications, frameworks and the operating system.
• With Apple since 1997
• Original MAC OS X architech
• M.Sc Computer Science from
Stanford University.
Jonathan Ive
• Senior Vice President, Industrial Design
• Design team leader since 1996
• Numerous design awards
• 2003 Designer of the Year by the Design Museum
London
• B.A and an honorary doctorate from Newcastle
Polytechnic
Philip W. Schiller
• Senior Vice President, Worldwide Product
Marketing
• Responsible for product marketing, developer
relations, and business marketing
• With Apple sine 1997
• Over 24 years marketing experience
• B.Sc in Biology from Boston College
Peter Oppenheimer
• Senior Vice President and Chief Financial
Officer
• Oversees controller, treasury, investor relations, tax,
information systems, internal audit and facilities
functions
• Former CFO at Automatic Data Processing
• With Apple since 1996
• M.B.A. from the University of Santa Clara
Bertrand Serlet
• Senior Vice President of Software
Engineering
• Leads Apple's Software Engineering group
• Key in the creation of Mac OS X
• Spent 4 years with Xerox
• Doctorate in Computer Science
from the University of Orsay, France
Financial Analysis
Financial Highlights
Quarterly Balance Sheet
Annual Balance Sheet
Annual Income Statement
Gross Margin %:
39.4% | 40.1% | 35.2%
Quarterly Income Statement
Annual Cash Flow
Quarterly Cash Flow Statement
Financials: Thoughts
• A large build-up of cash
• Vamping up R&D: new product to be
introduced in the near future?
• Sales in iPod have slowed down and
decreased since last year – product
cannibalization?
• last year increased their Accounts Payable
dramatically.
• What is next for Apple?
Recommendation
BUY
Google
FINANCIAL INFORMATION
5 YEAR CHART
1 YEAR CHART
GOOG VS NASDAQ
CUM. RETURN (5 YR)
COMMON SHARE STRUCTURE
Class B
 10 votes per share
 Not publicly traded
Class A
 1 vote per share
Shares
2011
2010
2009
2008
321.25M
319.77M
317.77M
315.11M
Employee Stock Options
 Generally 10 year term
EMPLOYEE OPTIONS
Options Outstanding
Balance at December 31, 2009
Options granted
Exercised
Cancellend/Forfeited
Balance at December 31, 2010
Vested and exercisable as of Dec. 31, 2010
Vested and exercisable as of Dec. 31, 2010
and expected to be vested thereafter
Range of Exercise
Prices
$0.30 - $94.80
$117-84 - $198.41
$205.96 - $298.86
$300.97 - $399.00
$401.78 - $499.07
$500.53 - $594.97
$605.49 - $699.35
$710.84
$0.30 - $710.84
WeightedNumber of
Average
Shares
Exercise Price
12,776,488
$298.73
1,743,195
$464.08
(2,518,223)
$259.95
(476,038)
$357.52
11,525,422
$330.24
6,004,433
$283.46
10,950,756
Options Outstanding
Weighted- WeightedAverage
Average
Number of Remaining Exercise
Shares
Life (Years)
Price
499,527
3.9
$27.27
633,703
3.5
$177.44
685,001
4.1
$275.04
6,999,888
6.1
$309.65
1,063,372
7.9
$438.35
1,602,979
9.2
$519.50
40,872
9.6
$614.14
80
7
$710.84
11,525,422
6.3
$330.24
WeightedAverage
Remaining in
Contractual
Term (in years)
$327.58
Options Exercisable
WeightedAverage
Number of Exercise
Shares
Price
493,309
$27.27
633,703
$177.44
676,446
$275.04
3,765,387
$309.65
382,125
$438.35
107,771
$519.50
2,186
$614.14
60
$710.84
6,060,987
$330.24
Aggregate
Intrinsic Value
(in millions)
6.3
5.8
$3,040.00
$1,865.00
6.3
$2,918.00
Options Exercisable and
Vested
WeightedAverage
Number of Exercise
Shares
Price
436,755
$22.86
633,703
$177.44
676,446
$274.87
3,765,387
$309.79
382,125
$437.31
107,771
$543.97
2,186
$633.85
60
$710.84
6,004,433
$283.46
Company Profile
HISTORY
1996
 Larry Page and Sergey Brin create search engine
as a research project
 Originally called BackRub
1998
 Incorporated in California
2000
 Begin selling advertisements associated with
search keywords
2003
HISTORY
 Re-incorporated in Delaware
2004
 Initial Public Offering
 19,605,052 shares sold
 $85 per share
 Unique online auction
2007
 Shares hit $700 for first time
STRATEGY
Mission Statement
“to organize the world's information and make
it universally accessible and useful”
Slogan
Don’t Be Evil
Growth
 Acquisition
STRATEGY
 YouTube, Android, Picasa, Etc.
 Product or service enhancement
 iGoogle, Google Docs, News Search, Google Scholar,
Google Books, Google Chrome
Companies acquired
Products
Outride
Google Personalized Search
Pyra Labs
Blogger
Neotonic Software
Gmail
Applied Semantics
Adsense + Adword
Picasa
Keyhole
Google Map , Google Earth 3D
Android
Youtube
DoubleClick
Adsense
WHAT DO THEY DO?
Advertising
 Based on search engine results
 Through web applications
 On mobile devices
No Tangible Products
 Sales of Nexus One phone discontinued in 2010
 Intellectual property lawsuits from time to time
ADVERSTISING
AdWords
 Shows ads alongside Google search results
 Advertisers “bid” in an auction to have their ads
displayed alongside certain keywords
 Pay-per-click advertising
AdSense
 Third party websites join Google Network
 Websites display text ads relevant to content
found on their websites
 Google shares profits with website developer
ADVERSTISING
Web Applications
 Free applications for users
 Advertisements displayed within applications
 Gmail, Google Docs, YouTube, Google TV, Google
Goggles, Google Maps, Google Calendar, Google Books
Mobile & Tablet OS
 Android OS: free licensing to vendors
 Partnership with carriers and mobile phone
manufacturers
 Free applications (ad supported)
 Android App Marketplace: 70% to developers,
30% to Google
ADWORDS
Google search: cheap flights
ADSENSE
AskTheBuilder.com
WEB APPLICATIONS
GMail
Google Finance
ANDROID
REVENUES
Year Ended December 31
2008
2009
2010
Advertising Revenues:
Google websites
Google Network websites
Total advertising revenues
Google websites as a % of advertising revenues
Google Network websites as a % of advertising revenues
Other revenues:
66%
31%
97%
68%
32%
3%
67%
30%
97%
69%
31%
3%
66%
30%
96%
69%
31%
4%
Year Ended December 31
2008
2009
2010
Advertising Revenues:
Google websites
Google Network websites
Total advertising revenues
Other revenues:
Total Revenues
14,414
6,715
21,129
667
21,796
15,723
7,166
22,889
762
23,651
19,444
8,792
28,236
1,085
29,321
COSTS
Revenues
Costs and Expenses
Costs of Revenues
Research and Development
Sales and Marketing
General and Administrative
Total Costs and Expenses
Income from Operations
Impairment of Equity Investments
Interest and Other Income, Net
Income Before Taxes
Provision for Taxes
Net Income
2006
10,605
4,225
1,229
850
751
7,055
3,550
0
461
4,011
934
3,077
Year Ended December 31
2007
2008
2009
16,594
21,796
23,651
6,649
2,120
1,461
1,280
11,510
5,084
0
590
5,674
1,470
4,204
8,622
2,793
1,946
1,803
15,164
6,632
(1,095)
316
5,853
1,626
4,227
8,844
2,843
1,984
1,668
15,339
8,312
0
69
8,381
1,861
6,520
2010
29,321
10,417
3,762
2,799
1,962
18,940
10,381
0
415
10,796
2,291
8,505
COSTS
Cost of Revenues
Cost of Revenues as % of Revenues
Traffic acquisition costs related to AdSense arrangements
Traffic acquisition costs related to distribution agreements
Total traffic acquisition costs
Traffic acquisition costs as a percentage of advertising
revenues
Year Ended December 31
2008
2009
2010
8,622
8,844
10,417
39.6%
37.4%
35.5%
Year Ended December 31
2008
2009
2010
5,284
5,265
6,162
655
904
1,155
5,939
6,169
7,317
28.1%
27.0%
Costs of revenues expected to increase in 2011 due to increases in:





Traffic acquisition costs
Data center costs
Credit card and transaction fees
Content acquisition costs
Other various costs
25.9%
COSTS
Research and Development Expenses
Research and Development Expenses as a % of Revenues
Year Ended December 31
2008
2009
2010
2,793
2,843
3,762
12.8%
12.0%
12.8%
“Research and development expenses consist primarily of compensation
and related costs for personnel responsible for the research and
development of new and existing products and services. We expense
research and development costs as they are incurred.”
Litigation
COSTS
 Patent lawsuits
 Costs for defense
 Settlement costs
 Loss of competitive advantages
Management Team
MANAGEMENT
Eric Schmidt
CEO and Chairman of the Board since 2001


Will relinquish CEO title to Larry Page on April 4, 2011

Former CEO of Novelli & CTO of Sun Microsystems

Bachelor of Engineering from Princeton

Master’s and PhD in Comp. Sci. from UC Berkley

Member of President Obama’s council of Science and Technology
MANAGEMENT
Larry Page
Co-Founder and President, Products


Will become CEO on April 4, 2011

Bachelor of Computer Engineering from Michigan

Master of Computer Science from Stanford

PhD of Computer Science (dropped out)
MANAGEMENT
Sergey Brin

Co-Founder and President, Technology

B.Sc. in Math and Computer Science from U of Maryland

Master of Computer Science from Stanford

PhD of Computer Science (dropped out)
MANAGEMENT
Nikesh Arora

Senior VP and Chief Business Officer

Joined Google in 2004

Responsible for creating and expanding strategic partnerships

Former Chief Marketing Officer at T-Mobile

Masters degree from Boston College

MBA from Northeastern University

CFA Designation
Financial Analysis
HIGHLIGHTS
Consolidated Statements of Income Data:
Revenues
Costs and Expenses
Costs of Revenues
Research and Development
Sales and Marketing
General and Administrative
2006
10,605
Year Ended December 31
2007
2008
2009
16,594
21,796
23,651
2010
29,321
4,225
1,229
850
751
6,649
2,120
1,461
1,280
8,622
2,793
1,946
1,803
8,844
2,843
1,984
1,668
10,417
3,762
2,799
1,962
Total Costs and Expenses
7,055
11,510
15,164
15,339
18,940
Income from Operations
Impairment of Equity Investments
Interest and Other Income, Net
3,550
0
461
5,084
0
590
6,632
(1,095)
316
8,312
0
69
10,381
0
415
Income Before Taxes
Provision for Taxes
4,011
934
5,674
1,470
5,853
1,626
8,381
1,861
10,796
2,291
Net Income
3,077
4,204
4,227
6,520
8,505
Net Income per share of Class A and
Class B common stock
Basic
Diluted
10.21
9.94
13.53
13.29
13.46
13.31
20.62
20.41
26.69
26.31
Year Ended December 31
2007
2008
2009
14,219
15,846
24,485
25,336
31,768
40,497
611
1,227
1,746
22,690
28,239
36,004
2010
34,975
57,851
1,614
46,241
Consolidated Balance Sheet Data:
Cash, Equivalents, and Securities
Total Assets
Total Long-Term Liabilities
Total Stockholder's Equity
2006
11,244
18,473
129
17,040
ANNUAL BALANCE SHEET
Google Inc.
CONSOLIDATED BALANCE SHEETS
(In millions, except share and par value amounts which are reflected in thousands, and par value per share amounts)
As of December
31, 2009
As of December
31, 2010
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Total cash, cash equivalents, and marketable securities (including securities loaned of $0 and $4031)
Accounts receivable, net of allowance of $79 and $101
Receivable under reverse repurchase agreements
Deferred income taxes, net
Income taxes receivable, net
Prepaid revenue share, expenses and other assets
Total current assets
Prepaid revenue share, expenses and other assets, non-current
Deferred income taxes, net, non-current
Non-marketable equity securities
Property and equipment, net
Intangible assets, net
Goodwill
10,198
14,287
24,485
3,178
644
23
837
29,167
415
263
129
4,845
775
4,903
13,630
21,345
34,975
4,252
750
259
1,326
41,562
442
265
523
7,759
1,044
6,256
Total assets
40,497
57,851
216
982
570
694
285
2,747
42
1,392
312
483
3,465
1,410
961
885
2,361
394
37
9,996
35
1,200
379
-
-
15,817
105
20,082
18,325
138
27,868
Total stockholders' equity
36,004
46,241
Total liabilities and stockholders' equity
40,497
57,851
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
Short-term debt
Accrued compensation and benefits
Accrued expenses and other current liabilities
Accrued revenue share
Securities lending payable
Deferred revenue
Income taxes payable, net
Total current liabilities
Deferred revenue, non-current
Income taxes payable, non-current
Other long-term liabilities
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, $0.001 par value ver share, 100,000 shares authorize; no shares issued and outstanding
Class A and Class B common stock and additional paid-in capital, $0.001 par value per share: 9,000,000 shares authorized; 317,772 (Class A
243,611, Class B 74,161) and par value of $318 (Class A $244, Class B $74) and 321,301 (Class A 250,413, Class B 70,888) and par value
of $321 (Class A $250, Class B $71) shares issued and outstanding
Accumulated other comprehensive income
Retained earnings
BALANCE SHEET – 3Q 2010
Google Inc.
CONSOLIDATED BALANCE SHEETS
(In millions, except share and par value amounts which are reflected in thousands, and par value per share amounts)
As of December
31, 2009
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Total cash, cash equivalents, and marketable securities (including securities loaned of $0 and $4031)
Accounts receivable, net of allowance of $79 and $101
Receivable under reverse repurchase agreements
Deferred income taxes, net
Income taxes receivable, net
Prepaid revenue share, expenses and other assets
Total current assets
Prepaid revenue share, expenses and other assets, non-current
Deferred income taxes, net, non-current
Non-marketable equity securities
Property and equipment, net
Intangible assets, net
Goodwill
Total assets
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
Short-term debt
Accrued compensation and benefits
Accrued expenses and other current liabilities
Accrued revenue share
Securities lending payable
Deferred revenue
Total current liabilities
Deferred revenue, non-current
Income taxes payable, non-current
Other long-term liabilities
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, $0.001 par value ver share, 100,000 shares authorize; no shares issued and outstanding
Class A and Class B common stock and additional paid-in capital, $0.001 par value per share: 9,000,000 shares authorized; 317,772 (Class A
243,611, Class B 74,161) and par value of $318 (Class A $244, Class B $74) and 321,301 (Class A 250,413, Class B 70,888) and par value of
$321 (Class A $250, Class B $71) shares issued and outstanding
Accumulated other comprehensive income
Retained earnings
Total stockholders' equity
Total liabilities and stockholders' equity
As of September
30, 2010
10,198
14,287
24,485
3,178
644
23
837
29,167
415
263
129
4,845
775
4,903
40,497
11,257
22,123
33,380
3,616
875
138
228
1,210
39,447
406
406
485
5,506
993
6,099
53,342
216
982
570
694
285
2,747
42
1,392
312
528
2,122
1,104
841
752
2,861
322
8,530
33
1,098
391
-
-
15,817
17,435
105
20,082
36,004
40,497
531
25,324
43,290
53,342
ANNUAL INCOME STATEMENT
Google Inc.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
Year Ended December 31,
2008
2009
Revenues
Costs and expenses:
Costs of revenues (including stock-based compensation
expense of $41, $47, $67)
Research and development (including stock-based
compensation of $732, $725, $861)
Sales and marketing (including stock-based compensation of
$206, $231, $261)
General and administrative (including stock-based
compensation of $141, $161, $187)
Total costs and expenses
Income from operations
Impairement of equity investments
Interest and other income, net
Income before income taxes
Provision for income taxes
Net income
Net income per share of Class A and Class B common stock:
Basic
Diluted
2010
21,796
23,651
39,321
8,622
8,844
10,417
2,793
2,843
3,762
1,946
1,984
2,799
1,803
15,164
6,632
(1,095)
316
5,853
1,626
4,227
1,668
15,339
8,312
69
8,381
1,861
6,520
1,962
18,940
10,381
415
10,796
2,291
8,505
13.46
13.31
20.62
20.41
26.69
26.31
INCOME STATEMENT – QUARTERLY
Google Inc.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
Mar 31,
2009
Jun 30,
2009
Sep 30,
2009
Quarter Ended
Dec 31,
Mar 31,
2009
2010
Jun 30,
2010
Sep 30,
2010
Dec 31,
2010
Revenues
Costs and expenses:
Costs of revenues
Research and development
Sales and marketing
General and administrative
Total costs and expenses
5,509
5,523
5,945
6,674
6,775
6,820
7,286
8,440
2,102
642
434
447
3,625
2,018
708
469
364
3,649
2,226
758
698
389
3,871
2,408
736
583
466
4,193
2,452
818
607
410
4,287
2,467
898
629
461
4,455
2,552
994
661
532
4,739
2,946
1,051
902
559
5,458
Income from operations
Interest and other income, net
Income before income taxes
Provision for income taxes
1,884
6
1,890
467
1,874
(18)
1,856
371
2,074
(7)
2,067
428
2,481
88
2,569
595
2,488
18
2,506
551
2,365
69
2,434
594
2,547
167
2,714
547
2,982
160
3,142
599
Net income
Net income per share of Class A
and Class B common stock:
Basic
Diluted
1,423
1,485
1,639
1,974
1,955
1,840
2,167
2,543
4.51
4.49
4.70
4.66
5.18
5.13
6.22
6.13
6.15
6.06
5.78
5.71
6.80
6.72
7.95
7.81
ANNUAL CASH FLOW STATEMENT
Google Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
2008
Operating Activities
Net Income
Adjustments:
Depreciation and amortization of property and equipment
Amortization of intangible and other assets
Stock-based compensation expense
Excess tax benefits from stock-based award activities
Deferred income taxes
Impairment of equity investments
Other
Changes in assets and liabilities, net of effects of acquisitions and divestiture:
Accounts receivable
Income taxes, net
Prepaid revenue share, expenses and other assets
Accounts payable
Accrued expenses and other liabilities
Accrued revenue share
Deferred revenue
Net cash provided by operating activities
Year Ended December 31,
2009
2010
4,227
6,520
8,505
1,212
288
1,120
(159)
(225)
1,095
(32)
1,240
284
1,164
(90)
(268)
0
(20)
1,067
329
1,376
(94)
9
0
(12)
(334)
626
(147)
(212)
339
14
41
7,853
(504)
217
262
34
243
158
76
9,316
1,129
102
(414)
272
(745)
214
111
11,081
(2,359)
(15,356)
15,763
(47)
0
0
(3,320)
(5,319)
(810)
(29,139)
22,103
(65)
0
0
(108)
(8,019)
(4,018)
(43,985)
37,099
(320)
2,361
(750)
1,067
(10,680)
(72)
159
0
0
0
87
143
90
0
0
0
233
294
94
(801)
5,246
(1,783)
3,050
Effect of exchange rate on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
(46)
2,575
6,082
11
1,541
8,657
(19)
3,432
10,198
Cash and cash equivalents at end of year
8,657
10,198
13,630
Supplemental disclosures of cash flow information
Cash paid for taxes
Non-cash financing activity:
1,224
1,896
2,175
0
0
750
Investing Activities
Purchases of property and equipment
Purchases of marketable securities
Maturities and sales of marketable securities
Investments in non-marketable equity securities
Cash collateral received from securities lending
Investments in reverse repurchase agreements
Acquisitions, net of cash acquired and proceeds received from divesture, and purchases of intangible and other assets
Net cash used in investing activities
Financing activities
Net proceeds (payments) from stock-based award activities
Excess tax benefits from stock-based award activities
Repurchase of common stock in connection with acquisitions
Proceeds from issuance of short-term debt
Repayment of short-term debt
Net cash provided by financing activities
Fair value of common stock issued and vested options assumed in connection with acquisitions
Google Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
CASH FLOW – 2Q 2010
Six Months Ended June 30,
2009
2010
Operating Activities
Net Income
Adjustments:
Depreciation and amortization of property and equipment
Amortization of intangible and other assets
Stock-based compensation expense
Excess tax benefits from stock-based award activities
Deferred income taxes
Other
Changes in assets and liabilities, net of effects of acquisitions and divestiture:
Accounts receivable
Income taxes, net
Prepaid revenue share, expenses and other assets
Accounts payable
Accrued expenses and other liabilities
Accrued revenue share
Deferred revenue
Net cash provided by operating activities
Investing Activities
Purchases of property and equipment
Purchases of marketable securities
Maturities and sales of marketable securities
Investments in non-marketable equity securities
Cash collateral received from securities lending
Acquisitions, net of cash acquired and proceeds received from divesture, and purchases of intangible and other assets
Net cash used in investing activities
Financing activities
Net proceeds (payments) from stock-based award activities
Excess tax benefits from stock-based award activities
Repurchase of common stock in connection with acquisitions
Net cash provided by financing activities
Effect of exchange rate on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of period
Supplemental disclosures of cash flow information
Cash paid for taxes
Non-cash financing activity:
Fair value of common stock issued and vested options assumed in connection with acquisitions
2,907
3,795
632
148
571
(36)
(114)
(23)
530
143
600
(31)
(4)
2
(42)
(64)
88
42
(281)
19
12
3,859
(197)
(164)
(191)
199
(75)
34
28
4,669
(402)
(10,636)
10,435
(28)
(5)
(636)
(715)
(25,421)
20,630
(230)
2,870
(419)
(3,285)
10
36
46
1
31
(801)
(769)
(15)
3,254
8,657
11,911
100
515
10,198
10,713
1,013
1,309
-
750
Google Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
CASH FLOW – 3Q 2010
Nine Months Ended Sep 30,
2009
2010
Operating Activities
Net Income
Adjustments:
Depreciation and amortization of property and equipment
Amortization of intangible and other assets
Stock-based compensation expense
Excess tax benefits from stock-based award activities
Deferred income taxes
Other
Changes in assets and liabilities, net of effects of acquisitions and divestiture:
Accounts receivable
Income taxes, net
Prepaid revenue share, expenses and other assets
Accounts payable
Accrued expenses and other liabilities
Accrued revenue share
Deferred revenue
Net cash provided by operating activities
Investing Activities
Purchases of property and equipment
Purchases of marketable securities
Maturities and sales of marketable securities
Investments in non-marketable equity securities
Cash collateral received from securities lending
Investments in reverse repurchase agreements
Acquisitions, net of cash acquired and proceeds received from divesture, and purchases of intangible and other assets
Net cash used in investing activities
Financing activities
Net proceeds (payments) from stock-based award activities
Excess tax benefits from stock-based award activities
Repurchase of common stock in connection with acquisitions
Issuance of short-term debt, maturities of 3 months or less, net
Issuance of short-term debt, maturities longer than 3 months
Net cash provided by financing activities
Effect of exchange rate on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of period
Supplemental disclosures of cash flow information
Cash paid for taxes
Non-cash financing activity:
Fair value of common stock issued and vested options assumed in connection with acquisitions
4,546
5,962
943
216
888
(64)
(288)
(26)
787
228
980
(43)
23
7
(127)
97
313
9
(14)
57
35
6,585
(456)
(295)
(355)
314
316
69
32
7,555
(589)
(19,587)
17,016
(46)
0
0
(40)
3,246
(1,473)
(37,589)
30,369
(265)
2,861
(85)
(859)
(7,831)
11
64
0
0
0
75
(65)
43
(801)
737
1,384
1,298
16
3,430
8,657
37
1,059
10,198
12,087
11,257
1,453
1,954
-
750
GOODWILL & INTANGIBLES
Note 9. Goodwill and Other Intangible Assets
Balance as of December 31, 2009
Goodwill acquired
Goodwill adjustment
Balance as of December 31, 2010
Patents and developed technology
Customer relationships
Trade names and other
Total
4,903
1,341
12
6,256
As of December 31, 2009
Gross
Net
Carrying Accumulated Carrying
Amount Amortization
Value
566
380
186
784
258
526
211
148
63
1,561
786
775
On2
Goodwill
Patents and developed technology
Customer relationships
Trade names and other
Net assets acquired (liabilities assumed)
Deferred tax assets (liabilities)
Total
87
27
2
0
(9)
16
123
AdMob
572
20
97
15
12
(35)
681
As of December 31, 2010
Gross
Net
Carrying Accumulated Carrying
Amount Amortization
Value
915
506
409
950
400
550
283
198
85
2,148
1,104
1,044
Slide
Widevine
154
95
10
53
10
31
8
5
(20)
10
17
(36)
179
158
Other
433
197
26
33
20
(40)
669
Total
1,341
307
166
61
13
(78)
1,810
CAPITAL EXPENDITURES
Note 7. Property and Equipment
Information technology assets
Construction in progress
Land and buildings
Leasehold improvements
Furniture and fixtures
Total
Less accumulated depreciation and amortization
Property and equipment, net
As of December 31,
2009
2010
3,868
4,670
1,644
2,329
1,907
3,969
646
738
65
65
8,130
11,771
3,285
4,012
4,845
7,759
Purchased office building in New York for $1.8B
 $700M allocated to land and $1.1B to building
 Funded partially through 1-year promissory note for $468M
Recommendation
RECOMMENDATION
BUY

Consistent earnings growth

Immaculate balance sheet

Strong cash flows

Excellent management team

Good potential growth in newer markets
Why do people buy Berries?
•
•
•
•
Well-designed physical keyboard
Great for e-mail
Blackberry Messenger (BBM)
Smartphone capabilities
5-year Chart
1-year Chart
1-year RIMM vs Nasdaq
What do people use Berries for?
Demographics
Mike Lazaridis(President, Founder, and CoCEO)
 Age 20: $600,000 GM contract
to build a computer network
control display
 Founded the Perimeter Institute
of Theoretical Physics and the
Institute for Quantum
Computing
 Owner of 50 patents including
wireless range, industrial display
systems, and DigiSync
 1994 Emmy Award and 1999
Academy Award for DigiSync
technology in film editing
Jim Balsillie(Co-CEO)
 Recruited in 1992
 MBA from Harvard School of
Business
 Chartered Accountant
 Former EVP and CFO of
Sutherland-Schultz, an industrial
service provider
 Great passion for hockey
 Stepped down as a Chairman in
2007 as a settlement with
Ontario Security Commission
regarding $250 million improper
accounting due to options
backdating
Executive Team
• COO
• CIO
• Don
• Robin
Morrison
Bienfait
• joined in
• previously
2000 from
with AT&T
AT&T and
Labs and
Bell
Global
Network
Services
• CMO
• Keith Pardy
• previously
with the
•
Coca-Cola
Company
and Nokia
Corp
• CFO
• Brian
Balduka
previously
with Molson,
Inc and
Ernst&Young
Consolidated B.S.
Consolidated Statement of SE
Statement of Cash Flows
Acquisitions
RIM by geography
RIM’s Worrisome Trend
Recommendation
Hold